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It can't get much better than this. Even dear old Dr. Pangloss scarcely could have written a better script for the stock market than what actually occurred in the first quarter.

In true melodramatic fashion, 2013 got off to a scary start as we seemed about to hurtle over the fiscal cliff -- only to avoid crashing into the abyss in the wee hours of New Year's Day. Then came sequestration on March 1, a term few could define let alone understand before that date. The dreaded Ides of March this time brought a crisis in the tiny Mediterranean island nation of Cyprus, which appeared to subside by the quarter's end.

And in the tradition of melodramas, the U.S. stock market overcame those obstacles to triumph in the end. First, the Dow Jones Industrial Average eclipsed its previous high of October 2007, and the Standard & Poor's 500, after a series of failed attempts, finally managed to get past its previous closing high on Thursday, the final trading day of the week, month, and quarter before the market took off for Good Friday. Those who stayed through the entire performance were amply rewarded, with the Dow industrials returning 11.9% (including dividends) for the quarter. That gain accounted for almost all of the blue chips' 13.4% total return for the past 12 months. As for the S&P 500, the first quarter was good for a 10.6% total return, bringing the 12-month return for the large-capitalization-stock benchmark to 14%.

And in the tradition of The Wizard of Oz (the original, not the prequel), there was no place like home for American investors. Small- and mid-cap stocks, which tend to be more domestically focused, outdid their bigger, multinational counterparts, with the Russell 2000 returning 12.4% for the first quarter and 16.3% for the latest 12 months, and the S&P MidCap 400 posting returns of 13.5% for the quarter and 17.8% for the 12 months.

Venturing abroad didn't pay in the latest quarter, as the U.S. proved a haven in a world of woe. That helped lift the dollar, reducing returns when translated from depreciating foreign currencies. In greenback terms, the MSCI EAFE (which tracks developed markets outside the U.S.) returned 5.2% for the quarter, having been juiced by an 11.7% surge in Japanese stocks (which rose 21.5% in yen terms). Emerging markets lost ground in the quarter, with the MSCI EM price-only index off 2.1% in greenback terms and 1% in local currencies.

ALL OF WHICH SHOWS it doesn't pay to worry about such things as fiscal drag, the inevitable rise in interest rates, the ever-more precarious situation in Europe, and the uncertain outlook in China. Indeed, these are reasons to be bullish. With risks abroad and interest rates near zero, it's been dubbed a TINA market -- as in There Is No Alternative to U.S. stocks as a place to store your money.

Clearly, nobody should care that the Congressional Budget Office figures the reversal of the 2% payroll tax cut and the tax hikes on upper-income earners that took effect on Jan. 1, plus the sequestration cuts, could shave 1.5% or more off of gross domestic product growth in 2013. Ignore, too, the fact that the 99% are trying to maintain their spending despite losing more of their paychecks to taxes, or a 70% jump in food-stamp recipients since 2008, to a record 47.8 million.

The 1%, meanwhile, have a windfall of extra dividends paid at the end of 2012 before the taxes on payouts were hiked for hoi polloi, as had been anticipated as part of the deal to avoid the fiscal cliff.

A disintegration of the euro zone and an end to the common currency also are reasons to be bullish. If you're a rich European, where would you want to stash your wealth -- a Cypriot bank or U.S. stocks? Not only did large depositors in Cyprus have to take a haircut, but Cyprus became a roach motel where cash could come in but couldn't get out. Effectively, a euro on that island is different from one in Germany, Spain, or even Slovenia. Think what would happen if a Rhode Island resident couldn't withdraw dollars or move to Massachusetts or New York. Oh, well, it's only Cyprus. As for Italy not having a functioning government, what else is new?

And rising bond yields are likely to impel investors who have poured billions into fixed-income funds to shift in the much-heralded Great Rotation into equities. So far it hasn't happened to any discernible degree. It may take something worse than the minus 0.12% total return on the Barclays U.S. Aggregate Bond Index in the first quarter to induce individuals to stampede into equities. Of course, steep capital losses in bonds would be just the lure to get folks to venture into riskier assets.

Finally, it is futile to fight the Fed as it keeps short-term interest rates pinned to the floor and bends longer-term yields by purchasing Treasury and agency mortgage-backed securities. While critics carp that the central bank may take losses on its bond portfolio if it ever has to sell securities, for now it is engineering returns that would make Stevie Cohen envious. By Wilshire Associates' estimates, U.S. stocks have increased by $1.9 trillion in value so far this year while the Fed has increased its holdings by some $274 billion. At a $1 trillion annual pace of purchases, just think what Bernanke & Co. can accomplish. Clearly, we can print our way to prosperity.

Happy April 1.

WHATEVER ELSE IS SAID about the quarter, the winners have been a curious bunch, notably some companies all but left for dead last year.

Whether rational or otherwise, exuberance of a most curious sort has put the staidest of sectors in the lead, consumer staples. Some of that is because Big Pharma stocks have gotten their mojo back as their new-product pipelines get refilled to replace drugs that have gone generic. What's more striking has been the steady ascent of companies that provide the mundane necessities of life instead of medications that improve or extend life.

These staples stocks also are commanding rich price-earnings ratios, some upwards of 20 times this year's forecast earnings, even though some of their earnings are likely to grow in the single digits, which speaks volumes about investor attitudes. In an uncertain world, no price seems to be too high to pay for this sector's relatively assured cash flows and decent dividends.

Taken a step further, Société Générale strategist Andrew Lapthorne attributes consumer-staples stocks' outperformance to their ability to cushion losses during times of market turmoil. "Essentially, fund managers are not seeking yield but buying downside protection, and in a world where market shocks are more common, the resulting premium is perfectly understandable," he writes in a research note. Indeed, consumer-staples stocks have performed in line with lower-risk high-yield bonds until recently -- when these stocks have pulled away from junk bonds. Similarly, Martin Pring, of the Pring Turner Capital Group, manager of the
AdvisorShares Pring Turner Business Cycle DBIZ 1.3307731715483198%AdvisorShares Pring Turner Business Cycle ETFU.S.: NYSE Arca25.12
0.32991.3307731715483198%
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:
100
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exchange-traded fund (DBIZ), writes the increasing relative strength in consumer staples is a warning "confidence under the surface is waning."

In a risky world, Bounty may be a better hedge than Treasury paper. P&G yields 2.9%, half again the U.S. 10-year note at 1.9%. Procter's stock also has had the attractive attribute of actually rising in price, up some 30% from the lows of mid-2012. But the leadership from companies that peddle such pedestrian wares is cause for caution in this stock market.